Research Discussion Paper – RDP 2022-05 The Real Effects of Debt Covenants: Evidence from Australia

Contents

• Introduction
• Corporate Debt Covenants in Australia
• Direct Effects of Covenants
• Indirect Effects of Covenants – Monetary Policy Transmission
• Aggregate Effects of Covenant Composition
• Conclusion
• Appendix A: Construction of Debt Covenants Data
• Appendix B: Other Descriptive Statistics
• Appendix C: Trends before and after Treatments
• Appendix D: Direct Effects – Robustness Checks
• Appendix E: Monetary Policy Shocks
• Appendix F: Average Partial Responses Relative to 2003
• Appendix G: Trends Using Restricted Sample and Breaching Rates
• References

I would like to thank Nalini Agarwal, Benjamin Beckers, Leon Berkelmans, James Bishop, Anthony Brassil, Deborah Cobb-Clark, Thomas Cusbert, Thomas Drechsel, Jonathan Hambur, Calvin He, Patrick Hendy, Gianni La Cava, Gulnara Nolan, David Orsmond, Gabrielle Penrose, Matthew Read, John Simon, Aarti Singh, Faisal Sohail, Brian Tran, Tristan Truuvert and Ben Wang for their feedback. The views expressed in this paper are those of the author and do not necessarily reflect the views of the Reserve Bank of Australia. The author is solely responsible for any errors.